Brazil’s 2020 Oil Bid Rounds Suspended

The Permanent Offer auction perhaps will be an exception, as government reacts to oil price declines and pandemic crises

The Brazilian government plans to suspend the auctions for oil and gas exploratory blocks that had been scheduled for 2020, with the exception, perhaps, of a new round for the areas on Permanent Offer.

The information was transmitted by the Secretary of Oil, Natural Gas and Biofuels of MME, Renata Isfer, today (April 1), to entities in the oil and gas sector during a conference call of the Crisis Committee, created due to the new coronavirus (Covid-19) pandemic, and confirmed by sources to Brasil Energy.

The decision to suspend the bids had been under study by the government for about a week.  The Mines and Energy Ministry (MME) and the Ministry of Economy have come to the conclusion that there is no economic environment for auctions to be held by the end of the year, in view of the strong demand and price crisis affecting the industry.

Officially, the government so far has publicly confirmed only the suspension of the 17th Round: earlier today the National Petroleum Agency (ANP) released a statement saying it had approved temporary suspension of the bidding process. Although the realization of the Permanent Offer bid has not been ruled out so far, there is a great chance that the process will also be suspended.

The meeting was attended by representatives of the Brazilian Petroleum Institute (IBP), and industry associations Abespetro, Firjan and ABPIP. At the meeting, it was mentioned that some companies already envision the possibility of a barrel of crude oil descending to the mark of US$10.

The government’s decision is in line with the strategy outlined by major oil companies in recent days. With the worsening of the coronavirus pandemic and the strong global drop in demand for oil, the companies have been cutting their capex amounts in recent days, especially in the exploration segment.

The 17th Bid Round was originally formatted to offer 128 blocks in the Campos, Santos, Pelotas, Potiguar and Pará-Maranhão basins, totaling 64,100 km². The government planned to include assets beyond the Brazilian Exclusive Economic Zone (EEZ).

On the other hand, the 7th Production Sharing Round was to offer offshore areas in the Campos, Ágata and Esmeralda Basins in the Santos region.

 

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